What is keeping foreigners from opening bank accounts in Italy?
What is happening? Why haven't overseas non-residents been making financial transactions in Italy recently? Foreign startups who use international banking systems or payment services, drop shippers or self-publishers, online content sellers, and service providers have undoubtedly noticed that it is becoming ever more challenging to conduct business. And, they must have felt this is primarily because of the hitches and problems associated with carrying out financial transactions, and creating accounts in Italy.
How we know? Because we experience it from within, that is, from our Italian headquarters. Truth be told, we are overwhelmed by demands for help and appeals for support. They appear to be pouring in at an alarming rate recently! The majority of inquiries imply complaints and objections. Clients approach us with reports about their difficulties with Transferwise accounts being stopped, Revolut accounts being deactivated, and other similar circumstances. Additionally, many ask for guidance regarding the time-consuming and complicated procedures associated with opening bank accounts.
If you're engaged in commercial operations or financial transactions in any capacity, you're probably aware that it is becoming more and more complex to create bank accounts in Italy for foreigners, especially foreign corporations. In short, if you do not live under a rock, you will have observed a substantial drastic shift in business between 2014 and today.
July 15, 2014, is an important date to consider, as, on this day, the OECD Council officially authorized the Common Reporting Standard (CRS), which was established in response to a G20 proposal. Essentially, the CRS requires that all trust organizations, banks, and loan associations provide intelligence and data to their partner territories annually and that member jurisdictions interchange it with each other. Additionally, the legislation identifies and catalogs the bank accounts’ details that must be exchanged, the financial institutions obliged to disclose, and the payment history and taxpayers that must be included in the statements.
While, as previously mentioned, all the CRS provides for is ensuring an automated and periodic flow of data between jurisdictions, it has however inadvertently made it extremely difficult for foreign individuals and businesses to create current accounts in Italy. Those operating in lawful and reputable enterprises are barred from opening bank accounts too!
What’s the underlying reason? Basically, countries have imposed a significant responsibility on banks to combat tax evasion by essentially mandating that they be in control of handling tax evaders. Thus, beginning in 2014, banks were obligated to establish and authenticate the source of their customers' assets and were held accountable and obligated. Specifically, a bank that makes the error of permitting a fraudster to maintain an account will face massive charges.
As a result of the everyday challenges posed by these increased responsibilities and obligations, financial institutions are now straining to comply with the latest standards above everything else. Yes, since if you ponder over it, financial institutions had to cope with significant "uprisings" in recent years. Primarily, banks had to adjust to Basel restrictions enacted in the aftermath of the Lehman Brothers catastrophe. They were then required to adhere to anti-illegal money transfer guidelines, i.e., the regulations, policies, and processes created to prevent the deceptive concealment of unlawfully obtained assets. Inevitably, anti-money laundering restrictions apply to a limited number of money operations, as they were created to combat illicit activity. Nevertheless, their effects are across the board, necessitating the handling of significant logistics challenges by particular institutions. However, financial institutions have to adapt to organizational advances brought about by the CRS's anti-evasion legislation.
Challenges emerge because banks are enterprises rarely large enough to execute all of these regulations. The majority of Italian Banking institutions, for instance, are either small-sized or medium-sized. And, besides other factors, the increasing trend toward mergers of banks recently is owing to institutions' inability to comply with all of these rules.
To conclude, the latest rulings that govern financial institutions have had an unanticipated consequence: if the status of a potential account holder deviates somewhat from the usual, the institution will decline to open an account out of concern of paying penalties.
About our services
An expert Italy-based team fluent in both Italian and English, with long-standing experience in all matters related to accounting, banking, and Italian and international tax legislation. Committed to our foreign clients’ satisfaction, and to the success of their enterprises, our crew of certified and highly competent attorneys, lawyers, and accountants, offers full support to non-resident entrepreneurs who carry out corporate ventures. What we guarantee? Trustworthy assistance and advice, comprehensive services, direct consultations, and flawless, efficient support.